LiechtensteinTax Obligations Detailed

In Liechtenstein, employers face various tax obligations and social security contributions for their employees. As of today, February 5, 2025, the following overview applies, keeping in mind that tax laws and regulations can change.

Income Tax Withholding

Employers are responsible for deducting income tax directly from their employees' salaries and remitting it to the tax authorities. The tax rate is determined by a progressive system, ranging from 2.5% to 22.4%, and is calculated based on the employee's total taxable income.

Social Security Contributions

Employers are obligated to make social security contributions for their employees. These contributions cover various programs, including:

• Old-Age, Survivors', and Disability Insurance (AHV): The employer's share is 4.9% of the employee's salary, up to a maximum annual earnings limit of CHF 148,200 for 2024 (CHF 126,000 as per another source; please verify with the latest official update), while the employee contributes 4.7%.
• Family Compensation Fund: Fully financed by the employer at a rate of 1.9% of the employee's salary.
• Unemployment Insurance: The employer and employee each contribute 0.5% of the employee's salary up to CHF 148,200 for 2024 (CHF 126,000 as per another source; please verify with the latest official update).
• Occupational Accident Insurance: Covered entirely by the employer, with rates varying based on the industry and risk level (approximately 0.1%).

In addition to these, the employer is also mandated to contribute to private health insurance for their full-time employees at a flat rate per employee, an amount to be confirmed for 2025 with the respective authorities.

Global Minimum Tax (GloBE)

For multinational enterprises (MNEs) meeting specific thresholds, Liechtenstein implemented the GloBE law, effective from January 1, 2024. This includes a Qualified Domestic Minimum Top-up Tax (QDMTT) and an Income Inclusion Rule (IIR) set at 15%. The Under-Taxed Profits Rule (UTPR) is expected to come into effect no earlier than January 1, 2025, but the exact implementation date is yet to be determined.

Value Added Tax (VAT)

A revised VAT law came into effect on January 1, 2025. Details regarding its practical implementation are still being clarified. Businesses should seek professional advice to ensure compliance with the new regulations.

Other Taxes

Other taxes relevant to employers include:

• Payroll Tax: While not explicitly mentioned as a separate tax, it is part of the income tax withholding process handled by the employer.
• Corporate Income Tax: Liechtenstein has a flat corporate income tax rate of 12.5%.

It's crucial to stay updated on the latest regulations and consult with local tax advisors for the most accurate and current information regarding employer obligations in Liechtenstein.

In Liechtenstein, employees are subject to income tax, wealth tax, and social security contributions, with various deductions and allowances available to reduce the overall tax burden.

Income Tax

• Progressive Tax Rates: Income tax rates are progressive, ranging from 1% to 8%, with an additional municipal surcharge (150% to 250% of the national tax) varying by municipality. Eight tax bands exist within this structure. For example, a married couple with two children earning CHF 200,000 annually might face an effective tax rate of approximately 6.5% after deductions and a 160% municipal surcharge. A single taxpayer with the same income might see an effective rate around 10.1% under similar conditions. As of 2025, the partial foreign tax liability is abolished, impacting expats previously under the 30% ruling, although transitional rights extend until the end of 2026.

• Withholding Tax: Employers withhold income tax directly from employee salaries and remit it to the tax authorities.

• Annual Tax Return: Employees must file an annual tax return to reconcile the withheld tax with the final tax liability based on the previous year's income.

Deductions and Allowances

• Employment Expenses: A standard deduction of CHF 1,500 (€1,500, as of 2025-02-05) is available for employment-related expenses (CHF 1,000 for travel and CHF 500 for education). Expenses exceeding this amount may also be deductible with proper documentation.

• Insurance Premiums: Premiums for life, sickness, and accident insurance are deductible up to CHF 3,500 for single individuals, CHF 7,000 for married couples, and CHF 2,100 per child.

• Pension Contributions: Contributions to pension funds are deductible up to 18% of the employee's annual income.

• Child Allowance: A deduction of CHF 12,000 per child is available. Note that changes in Italy regarding deductions for dependent children do not apply to Liechtenstein. Always verify current Liechtenstein regulations concerning child allowances.

• Other Deductions: Additional deductions may be available for education expenses, medical expenses exceeding CHF 6,000 per person, and charitable donations up to 10% of taxable income.

Wealth Tax

Liechtenstein residents are subject to an annual wealth tax, calculated on the net worth of all assets. Most income derived from assets subject to wealth tax is exempt from income tax, creating a level of "decision neutrality."

Social Security Contributions

Both employers and employees contribute to social security, covering old-age, disability, and unemployment insurance. The employee's contribution is 4.7% for the old-age and dependent pension schemes and disability insurance (up to a maximum of 18% of income for employed and self-employed individuals). An additional 0.5% contribution applies to unemployment insurance on the first CHF 126,000 of compensation.

Additional Considerations

• Tax Treaties: Liechtenstein has a network of tax treaties to avoid double taxation for residents earning income abroad. Always check the specific treaty provisions.
• Deadlines: The deadline for filing the annual tax return is typically March 31st of the following year.
• Professional Advice: Consulting a tax advisor is recommended for personalized guidance and optimization.

It's crucial to consult official government resources or a qualified tax advisor for the most up-to-date and precise information on tax obligations in Liechtenstein, as regulations may be subject to change. This information is current as of February 5, 2025, and might not reflect future adjustments.

Liechtenstein's VAT system, closely aligned with Switzerland's, levies a standard rate of 8.1% on most goods and services.

VAT Rates

• Standard Rate: 8.1% (increased from 7.7% on January 1, 2024).
• Reduced Rate: 2.6% (increased from 2.5% on January 1, 2024) applies to essential goods like food, medicine, books, and newspapers. This also applies to menstrual hygiene products since January 1, 2025.
• Accommodation Rate: 3.8% (increased from 3.7% on January 1, 2024) applies to lodging and accommodation services.

VAT Registration

• Threshold: Businesses with a worldwide annual turnover exceeding CHF 100,000 must register for VAT. Those below this threshold can opt for voluntary registration.
• Non-Resident Businesses: Non-resident businesses providing digital services and exceeding the CHF 100,000 threshold must register and appoint a fiscal representative. There is no simplified registration process for them.
• Online Platforms: As of January 1, 2025, online platforms facilitating sales in Liechtenstein are generally liable for VAT. Exemptions exist if specific criteria are met, such as not being involved in the ordering process, and generating revenue directly related to the business.

VAT Filing and Payment

• Electronic Filing: Mandatory through the eVAT portal from January 1, 2025.
• Frequency: VAT returns are typically filed quarterly. Those using the net tax rate method may file semi-annually.
• Deadline: The standard deadline is within 60 days of the end of each quarter. Note: the filing deadlines for Q4 2024 and S2 2024 are extended to the end of April 2025. However, the payment deadlines remain unchanged. Businesses must file an annual reconciliation within 240 days of the year-end.
• Payment: Tax payments are due within 30 days of the assessment notice. A 4% default charge applies to late payments.

Exempt Goods and Services

Certain goods and services are exempt from VAT, including:

• Health, social security, and education services.
• Banking and insurance services.
• Transactions involving gold (as of January 1, 2025).

Invoicing Requirements

• Mandatory Invoices: Businesses must issue invoices for all transactions, clearly displaying the VAT amount.
• Invoice Content: Required details include date, unique sequential number, supplier's VAT ID, customer details, description of goods/services, and VAT rate applied.
• Retention: Invoices must be stored for at least ten years.
• E-invoicing: Encouraged, but not mandatory. E-invoices must meet the same requirements as paper invoices.

Other Taxes

• Customs Duties/Import Tariffs: Liechtenstein applies Swiss customs duties and import tariffs due to the 1923 customs union treaty.
• Excise Taxes: Liechtenstein levies excise taxes on items like petroleum, tobacco, cars, and beer.
• Stamp Duty: Swiss stamp duty law applies in Liechtenstein, based on a 1923 treaty.
• Property Taxes: There are no property taxes in Liechtenstein.

It is important to note that this information is current as of February 5, 2025, and may be subject to change. Consulting with a tax advisor is recommended for specific situations.

Liechtenstein offers a competitive tax environment with a flat corporate income tax rate and several incentives, primarily aimed at holding companies and private asset structures.

Corporate Tax Incentives

• Notional Interest Deduction (NID): Companies can deduct a notional interest (currently set at 4%) on adjusted equity. This aims to reduce the tax burden on equity financing and encourage investment.
• Holding Companies: Dividend income and capital gains from shareholdings are generally exempt from corporate income tax. There are no holding period requirements or minimum participation thresholds for this exemption. This makes Liechtenstein an attractive jurisdiction for holding companies.
• Private Asset Structures (PAS): Companies qualifying as PAS are subject only to a minimum annual tax of CHF 1,800. To qualify, a PAS must be a passive investor, refrain from commercial activities, and meet specific ownership criteria. They are not required to file annual accounts or tax returns.

Other Tax Considerations

• Standard Corporate Income Tax Rate: The standard corporate income tax rate is 12.5%.
• Real Estate Capital Gains Tax: Capital gains from real estate located in Liechtenstein are subject to a separate real estate capital gains tax, but gains from real estate located abroad are exempt.
• Minimum Tax: A minimum annual tax of CHF 1,800 applies to all companies, with certain exceptions available for small businesses.
• Loss Carryforward: Losses can be carried forward indefinitely to offset future profits. However, the amount of loss that can be offset against profit in a given tax year is limited to 70% of the taxable profit before the loss offset.

As of today, February 5, 2025, information may be subject to change.